Coty, Del deal closes
NEW YORK —Industry consolidation continues, as Coty has acquired Del Laboratories, a move that adds Del’s flagship Sally Hansen beauty brand and an OTC pharmaceutical business to Coty’s portfolio.
Under the terms of the agreement, all operations of DLI Holding, the parent company of Del Labs, will merge into Coty. Financial terms of the deal were not disclosed. The transaction closed on Dec. 31, as planned.
Executives at both Coty and Del Labs have not disclosed such details as what management changes, if any, are on the horizon or how Coty will leverage the OTC business, which includes the flagship OTC pharmaceutical brand Orajel.
What Coty has stated is that the deal further enhances Coty Beauty’s fragrance, color and skin care portfolio through the addition of the Sally Hansen, N.Y.C. New York Color, La Cross, Orajel and Dermarest brands. It also brings Coty, which generates annual net sales of $3.3 billion, one step closer to its goal of becoming a $5 billion beauty company. For the year ended Dec. 31, 2006, Del Labs posted sales of $425.9 million.
“We view the acquisition of DLI Holding Corp. as a natural extension of our strategy to offer a unique portfolio of brands that produce some of the strongest consumer franchises around the world,” stated Bernd Beetz, chief executive officer of Coty. “Del’s established, well-regarded portfolio of quality products mesh well with our core offerings, and their strong presence in North America complements Coty Beauty and Coty’s international strengths.”
The Coty Beauty brand portfolio includes, but is not limited to, fragrances Celine Dion, David and Victoria Beckham, Shania Twain and Stetson, and cosmetics brand Rimmel.
Indeed, the deal enables Coty to extend its portfolio offering, which makes well over half of its sales (68 percent) in fragrance. Prior to the deal, color cosmetics accounted for 15 percent of Coty’s sales, while toiletries stood at 14 percent and skin care/sun care at 3 percent.
Del’s cosmetics business accounted for approximately 80 percent of its 2006 net sales, which is focused on nail color, nail treatment, bleaches and hair removal products, depilatories, beauty implements and value cosmetics. Meanwhile, its OTC pharmaceutical business accounted for approximately 20 percent of its 2006 net sales. That segment is focused on oral analgesics, children’s toothpaste and sore throat relief and specialty OTC products.
Del’s products are available in more than 60,000 retail locations domestically. Internationally, it has experienced growth from its direct operations in Canada, the United Kingdom, Puerto Rico and Mexico, as well as through distributors, licensees and joint venture relationships in approximately 60 countries.
Uniondale, N.Y.-based Del was acquired by Kelso & Co., a New York-based private-equity firm, in early 2005 for $465 million, including debt.
Kelso also was considering an initial public offering of stock for Del and in August filed an IPO in an effort to raise up to $200 million. However, according to a Wall Street Journal report citing sources familiar with the deal, the company opted for a sale because of strong acquisition interest. In the regulatory filing in August, Del stated that it would “evaluate and selectively pursue acquisitions or license agreements” that make strategic sense.
Del also expressed an interest in expanding its international footprint, noting that international sales have grown 22 percent since the beginning of 2005 and accounted for about 17 percent of its net sales in 2006. Coty has stated that more than half (55 percent) of its sales are generated in Europe, followed by the Americas at 33 percent, Asia at 6 percent and “other” at 6 percent.
“As our exceptional management team has guided Del through a sustained period of organic growth, cost reduction, supply chain enhancement and international expansion, we sought an ownership structure that would enable us to continue to build upon the organization’s many growth opportunities,” stated Charles Hinkaty, president and CEO of Del Laboratories, in a statement announcing the deal.